The Impact of COVID-19 on U.S. M&A

Updated 7/7/2020

We are exploring the effect of COVID-19 on mergers and acquisitions in the United States. As this historic pandemic continues to evolve, we will track the number of COVID-19 cases and compare them to the overall M&A deal volume and provide market observations. Check back each week for updated information.  

The Impact of COVID-19 on Middle Market M&A

For purposes of this analysis, PCE focused on data trends beginning March 22 when new cases of COVID-19 increased significantly.

Total M&A Market

  • As the U.S. makes its way into summer, overall M&A activity continues to feel the effects of COVID-19. Total U.S. M&A volume is down nearly 56% for June 1 – June 13 compared to the same period in 2019.
  • Consumer Discretionary is off to a rough start this summer and as the industry settles into the month of June, interest has not changed for the better. From June 1 through June 13, Consumer Discretionary transaction volume is down nearly 80% (14 transactions) when compared to the same period in 2019 (69 transactions).
  • The Building Products & Construction industry remains behind schedule as it struggles to return to normal transaction volume. Transaction volume is down more than 59% (11 transactions) between June 1 – June 13 when compared to the same period in 2019 (27 transactions).

Effects of COVID-19 by Industry

Jump to industry details by clicking on any industry listed below:

Aerospace, Defense & Government Contracting

Banking, Finance & Insurance

Building Products & Construction

Business Services

Consumer Discretionary

Diversified Industrials

Food & Agriculture

Healthcare

IT & Telecom

Power & Energy

Transportation & Logistics

Aerospace, Defense & Government Contracting

  • The summer heat has the Aerospace, Defense & Government Contracting industry slowly withering away during the COVID-19 pandemic. From May 8 through June 13, the industry has experienced five consecutive weeks of zero transaction volume.
  • Total transaction volume for the industry between March 22 – June 13 is down 50% (five transactions) compared to the same period in 2019 (10 transactions).
  • Four out of the five deals that closed between March 22 – June 13 were driven by strategic buyers. In comparison, 2019 saw 30% of transactions (three transactions), completed by strategic buyers in the same period.
  • Twenty percent of the deals that closed between March 22 – June 13 (two transactions) were comprised of targets primarily engaged in Aerospace and Defense Maintenance and Services. Since March 22, when new cases of COVID-19 began to increase significantly, the Aerospace, Defense & Government Contracting industry has only realized a total of five transactions.

Banking, Finance & Insurance

  • Strategic buyers drove over 95%[1] of all transactions (96 transactions) between March 22 – June 13. In comparison, 2019 saw over 98% of transactions (161 transactions) completed by strategic buyers in the same period.
  • Over 64% of the acquisitions made between March 22 – June 13 (65 transactions) were of insurance companies.
  • M&A activity within the Banking, Finance & Insurance industry is down more than 39% (101 transactions) during the time frame of March 22 – June 13 compared to the same period in 2019 (166 transactions).

Building Productions & Construction

  • M&A activity between March 22 – June 13 is down nearly 60% (52 transactions) compared to the same period in 2019 (129 transactions).
  • Between March 22 – June 13, Construction and Engineering (38 transactions) made up over 73% of the total closed transactions.
  • 82% of all transactions closed between March 22 – June 13 (41 transactions) were driven by strategic buyers. In comparison, 2019 saw over 89% of transactions (110 transactions) were completed by strategic buyers within the same period.

Business Services

  • Business Services M&A activity between March 22 – June 13 is down more than 51% (65 transactions) compared to the same period in 2019 (133 transactions).
  • Nearly 59% of the deals closed between March 22 – June 13 (36 transactions) were comprised of targets engaged in Research and Consulting Services.
  • Eighty percent of all transactions completed between March 22 – June 13 (48 transactions) were driven by strategic buyers. In comparison, 2019 saw over 92% of transactions (116 transactions) were closed by strategic buyers within the same period.

Consumer Discretionary

  • Consumer Discretionary was an early indicator of how COVID-19 would impact weekly M&A activity with industry volume falling quickly in mid-March and has continued to decline through the week ended June 13.
  • Total M&A activity for the industry between March 22 – June 13 is down more than 61% (136 transactions) compared to the same period in 2019 (351 transactions). M&A activity between March 22 – June 13 averaged more than 11 transactions per week in 2020 compared to more than 29 transactions in the same period of 2019.
  • Nearly 88% of transactions between March 22 – June 13 (99 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 82% of transactions (239 transactions) were completed by strategic buyers within the same period.
  • Transaction volume within Hotels, Resorts and Cruise Lines, a subsector of the Consumer Discretionary industry, has realized overwhelming blows during COVID-19. Total subsector transaction volume is down more than 84% (12 transactions) between March 22 – June 13, compared to that of the same period in 2019 (76 transactions).

Diversified Industrials

  • Diversified Industrials continues to experience lower transaction volume compared to 2019. M&A activity between March 22 – June 13 averaged nearly six transactions per week in 2020 compared to an average of more than 14 transactions in the same period of 2019.
  • Total M&A activity for the industry between March 22 – June 13 is down more than 60% (68 transactions) compared to the same period in 2019 (171 transactions).
  • More than 83% of transactions between March 22 – June 13 (55 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 86% of transactions (145 transactions) were completed by strategic buyers within the same period.
  • Transaction volume comprised of targets primarily engaged in Trading and Distribution and Industrial Machinery, subsectors of the Diversified Industrials industry, accounted for nearly 74% (50 transactions) of all transaction volume between March 22 – June 13. This percentage nearly replicates the same period in 2019 when almost 77% of transactions (131 transactions) were comprised of targets in the same subsectors.

Food & Agriculture

  • As summer progresses, the Food & Agriculture industry's resilience against COVID-19 is waning. Between June 1 - 13, Food & Agriculture transaction volume is down 60% (eight transactions) compared to the same period in 2019 (20 transactions).
  • Nearly 92% of transactions between March 22 – June 13 (65 transactions) were driven by strategic buyers. In comparison, 2019 saw more than 80% of transactions (74 transactions) were completed by strategic buyers within the same period.
  • Over 44% of the transactions closed between March 22 – June 13 (34 transactions) were comprised of targets engaged primarily in the subsector of Packaged Foods and Meats.

Healthcare

  • Despite the Healthcare industry’s essential industry status, total transaction volume is down more than 46% (201 transactions) between March 22 – June 13 when compared to the same period in 2019 (373 transactions).
  • Nearly 88% of closed transactions between March 22 – June 13 (167 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 86% of transactions (305 transactions) completed by strategic buyers within the same period.
  • More than 20% of the transactions (41 transactions) closed between March 22 – June 13 were comprised of targets engaged primarily in health care services. In comparison, 2019 saw over 30% of transactions (113 transactions) were comprised of targets in the same subsector within the same time frame. This decline in volume can likely be attributed to COVID-19.

IT & Telecom

  • The IT & Telecom industry continues to experience lower transaction volume compared to 2019. Between June 1 – June 13, IT & Telecom transaction volume is down more than 31% (64 transactions) when compared to the same period in 2019 (93 transactions).
  • More than 90% of transactions between March 22 – June 13 (317 transactions) were driven by strategic buyers. This percentage of strategic activity nearly replicates that of which took place within the same period in 2019 as nearly 92% of transactions (479 transactions) were completed by strategic buyers, although at a much lower volume.
  • Overall industry transaction volume between March 22 – June 13 is down nearly33% (361 transactions) when compared to the same period in 2019 (538 transactions). M&A activity between March 22 – June 13 averaged more than 30 transactions per week in 2020 compared to an average of nearly 45 transactions in the same period of 2019.
  • Transaction volume comprised of targets primarily engaged in Application Software and IT Consulting and Other Services, subsectors of the IT & Telecom industry, accounted for nearly 22% (191 transactions) of all transaction volume between March 22 – June 13. In comparison, 2019 saw nearly 60% of transactions (320 transactions) were comprised of targets in the same subsectors, although at a much higher volume.

Power & Energy

  • Total M&A transaction volume for the Power & Energy industry between March 22 – June 13 is down more than 33% (72 transactions) compared to the same period in 2019 (108 transactions).
  • Transaction volume comprised of targets engaged primarily in Utilities, a subsector of the Power & Energy industry, stands alone in first place, accounting for more than 58% of the transactions closed between March 22 – June 13. In a distant second place, are companies engaged in Oil and Gas Storage and Transportation, making up over 18% of volume in the same time frame.
  • Over 81% of transactions between March 22 – June 13 (57 transactions) were driven by strategic buyers. In comparison, 2019 saw nearly 90% of transactions (94 transactions) were completed by strategic buyers within the same period.

Transportation & Logistics

  • Total M&A activity for the Transportation & Logistics industry between March 22 – June 13, is down more than 59% (18 transactions) compared to the same period in 2019 (44 transactions).
  • Transaction volume within Trucking, and Air Freight and Logistics, subsectors of the Transportation & Logistics industry, evenly split (7 transactions each) the vast majority of transaction volume between March 22 – June 13. The two subsectors together make up approximately 80% of total M&A transaction volume within the same time frame.
  • More than 94% of all transactions closed between March 22 – June 13 (16 transactions) were driven by strategic buyers. In comparison, 2019 saw over 81% of transactions (35 transactions) were completed by strategic buyers within the same period.

1. Percentage of strategic vs financial buyers throughout commentary based on total transactions with published buyer data available.

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